Central Bank Governor Urges Action Amidst Growing Stablecoin Concerns

Bank of Korea Governor Rhee Chang-yong highlighted the challenges posed by the increasing dominance of stablecoins like tether (USDT) and USD Coin (USDC). Despite their name, these digital currencies often lack the stability they promise, as per Rhee’s statement reported by Yonhap News.

Rhee emphasized the pressing need for central banks to contemplate the introduction of central bank digital currencies (CBDC), either for retail or wholesale use, during the Digital Money: Navigating a Changing Financial Landscape conference. He stressed that the widespread adoption of CBDCs could potentially lessen the significance of central bank money, thereby impacting the efficacy of monetary policies.

This concern arises from the recent scrutiny surrounding the capability of stablecoins, which are cryptocurrencies pegged to fiat currencies like the dollar or euro, to maintain their pegs. S&P’s introduction of a grading system to evaluate this specific feature placed tether, the largest stablecoin by market value, just one rank above the lowest on its five-point scale. Notably, none of the eight coins assessed received the highest rating.

Additionally, Rhee revealed the Bank of Korea’s efforts in developing a wholesale CBDC pilot and exploring its application in the tokenization of real-world assets. The bank has outlined plans for a retail pilot scheme involving 100,000 participants scheduled for next year, as reported by Yonhap.

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